How to decide the uncollectible amount of accounts receivable is a difficult problem. The most common way is to estimate it by historical experience or by referring to the standards of the same trade. We estimate the amount of bad debts during the accounting period of each month.
There are three common estimation methods (ATS currently adopts the third one)
Follow the credit sales amount of the current year, and provide a certain proportion of bad debt expenses (sales percentage method)
Based on the balance of accounts receivable at the end of the year (percentage method of account balance)
Individual recognition method (analyze receivables one by one to assess whether bad debt is accrued)
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